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Market Overview

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The global pharmaceutical R&D outsourcing market experienced a valuation of USD 70.37 billion in 2021 and is projected to reach USD 121.71 billion by 2027, with a compound annual growth rate (CAGR) of 9.56% between 2022 and 2027. In an era of exponential information growth, advancing technology, and an unpredictable economic landscape, pharmaceutical companies are increasingly turning to academia and private contract research organizations (CROs) to outsource their research efforts. The growth of the pharmaceutical R&D outsourcing market is driven by the increased investment of pharmaceutical and biotechnology companies in outsourced services. Outsourcing activities cover a wide range of R&D stages, including genetic engineering, target identification, assay creation, hit discovery and lead optimization, safety and efficacy assessments, and human clinical trials.

Decentralized or virtual clinical trials have the potential to revolutionize traditional clinical research methods and create a patient-centric ecosystem. These solutions leverage various technologies such as advanced applications, electronic devices, online social engagement platforms, artificial intelligence (AI), robotic process automation, and machine learning (ML). Patient recruitment and absenteeism are significant contributors to clinical trial delays, with approximately 30% of phase 3 study discontinuations attributed to recruitment difficulties. These delays can cost pharmaceutical companies up to USD 8 million per day. However, decentralized clinical trials that incorporate digital or hybrid models enable easier and faster recruitment, streamlining the entire process and improving overall engagement.

Artificial intelligence (AI) is playing a transformative role in drug discovery and development, particularly within the healthcare and pharmaceutical sectors. AI has diverse applications in areas such as drug discovery, clinical trials, and pharmaceutical productivity. The drug development process, which involves various complex stages, can be expedited using AI, leading to faster achievement of targets.

Many pharmaceutical companies are leveraging innovative technologies like AI and machine learning to generate high-quality results within shorter timeframes. AI can assist in drug design, decision-making, and personalized therapy selection for patients, while also storing valuable clinical data for future drug development.

Global key players in the pharmaceutical and biotech industries, such as Eli Lilly, Amgen, Merck, LEO, AstraZeneca, Bayer, Novartis, J&J, and BASF, are actively adopting machine learning for pharmaceutical discovery.

New models of collaboration are emerging, with Clinical Research Organizations (CROs) taking the lead. CROs establish early entry points for diseases through chemical and biological approaches, engaging potential interested companies in integrated drug discovery projects. Strategic partnerships have long been a fundamental aspect of the pharmaceutical industry, with numerous licensing agreements, joint research initiatives, and collaborations between biopharmaceutical companies and academic research institutes.

Recent years have witnessed significant outsourcing partnerships, including the collaboration between AstraZeneca, based in the UK, and academic organizations like Cambridge University, focusing on drug development. AstraZeneca has also partnered with the University of Texas MD Anderson Cancer Center in the United States to advance immunotherapy.

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Market Segmentation

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The market is segmented based on various factors, including stage of development, product type, company size, therapy area, geography.

Segmentation by Stage of Development
Clinical
Non-Clinical

Segmentation by Product Type
Small Molecules
Biologics

Segmentation by Company Size
Small & Mid-Sized Companies
Large Companies

Segmentation by Therapy Area
Oncology
Cardiovascular Diseases
Infectious Diseases
Musculoskeletal Disorders
Central Nervous System Disorders
Gastrointestinal Disorders
Other Therapy Areas

Segmentation by Geography
North America – US, Canada
Europe – Germany, France, UK, Italy, Spain
APAC – China, Japan, India, South Korea, Australia
Latin America – Brazil, Mexico, Argentina
Middle East & Africa – South Africa, Saudi Arabia, Turkey, UAE

The small molecules segment has emerged as a key player in the pharmaceutical R&D outsourcing market. This is primarily due to the crucial role that small molecules play in alleviating the burden of chronic diseases.

Pharmaceutical companies undertaking clinical studies on small molecules need to collaborate with contract research organizations (CROs) that can conduct valuable research using reliable data. In 2021, the Food and Drug Administration (FDA) granted approval to 50 novel drugs, out of which 36 were small molecules, accounting for 72% of total pharmaceutical approvals by the FDA.

Among the different stages of development, the clinical segment accounted for a significant share of approximately 64.13% in 2021. The prominence of the clinical segment can be attributed to the fact that there are approximately 47,689 clinical trials in Phase I, according to the World Health Organization (WHO). Phase I trials are typically outsourced as they involve well-established procedures such as patient recruitment, trial activities, analysis, and documentation.

Phase I clinical trials necessitate a capital investment of over USD 30 million. Therapeutic areas such as oncology and respiratory diseases require substantial funding. Approximately 70% of drugs successfully move from Phase I to the next phase, as determined by the US FDA.

Phase II trials can span several years. WHO reports suggest that there are around 88,530 compounds undergoing Phase II clinical trials as of 2022. Additionally, approximately 33% of new drugs progress from Phase II to the subsequent phase, based on data from the US FDA.

The number of subjects involved in Phase II trials typically ranges from hundreds to about 3,000. If the study results are deemed positive by the FDA, the experimental drug or equipment will receive approval. WHO data indicates that approximately 68,999 drugs have reached Phase III as of 2022. In this phase, participants are randomly selected to evaluate the efficacy of the new treatment. This procedure is often conducted simultaneously in various regions and demographics to analyze drug effectiveness.

In terms of company size, the small and mid-sized companies segment accounted for a significant share of approximately 57.54% in 2021. This segment is estimated to be higher because, in 2019, emerging therapeutic companies (ETCs) were responsible for 73% (5,067 out of 6,984) of global industrial and pharmaceutical projects at all clinical stages, either independently or in collaboration with partners. Large companies conducted the remaining projects.

SMEs account for 71%, 76%, 68%, and 62% of Phase I, II, III, and new drug applications, respectively, compared to large companies. Furthermore, 45% of all clinical ETC pipeline projects are carried out in collaboration with other partners. Oncology is the primary focus of these SME clinical projects.

According to market research conducted in 2018, there were 74 small pharmaceutical companies with total sales of $159 billion and 446 pharmaceutical drugs in their R&D pipeline. Additionally, there were 9 medium-sized companies with sales of $50 billion and 181 products, along with $139 billion in the R&D pipeline.

A study by BIO in 2017 revealed that small biotechnology companies accounted for 70% of all global bio pharmacy clinical trials, comprising 6,679 programs, with 43% of them conducted in collaboration with other companies. Large companies were responsible for the remaining 30% of these clinical trials.

In terms of therapy areas, the oncology segment held a major share of approximately 30.71% in 2021. This can be attributed to the fact that there were 19.3 million new cancer cases and around 10 million fatalities worldwide in 2020, accounting for nearly one-sixth of all deaths, according to the Globocan 2020 report.

Oncology is a dominant field for both industry-sponsored and non-industry-sponsored clinical trials. The increasing prevalence of cancer has significantly contributed to the rise in oncology therapeutic area clinical trials. Efforts to test and develop cancer treatments globally have increased the volume of clinical trials conducted in this area.

In 2019, only around 30 chemotherapeutic drugs were approved by the FDA. In the US alone, there have been approximately 361,628 clinical trials conducted solely for cancer over the past 20 years. This increased focus on cancer clinical trial drug development has led to a rise in the overall volume of clinical trials conducted.

Global spending on anticancer medications saw a substantial increase of 14.3% in 2020, reaching $164 billion. It is projected that spending will reach $269 billion by 2025. The high prices of novel anticancer drugs drive much of this growth. The direct and indirect expenses associated with oncological treatments significantly impact the success of patients’ treatment and their financial well-being worldwide.

The North America region accounted for a significant share of approximately 36.23% in 2021. This can be attributed to significant investments made by companies in R&D to strengthen the pipeline for chronic diseases, which is expected to boost the introduction of innovative therapeutics in North America. Prominent start-up CROs operating in the pharmaceutical R&D outsourcing market are also found in this region. Collaborations and partnerships among stakeholders in the pharmaceutical ecosystem have been observed in the North American region.

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Competitive Landscape

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In the pharmaceutical R&D outsourcing market, vendors engage in competition by offering a broad array of services, ensuring high quality, and facilitating the scale-up development of pharmaceuticals. The market is highly competitive, driving vendors to employ various strategies in order to sustain their competitive edge over their counterparts. These market players prioritize acquisitions, partnerships, diversification of outsourcing services, and fortification of distribution networks with the aim of expanding their market share. Within the pharmaceutical R&D outsourcing market, there exist approximately 33 vendors, comprising both key players and other noteworthy participants.

Key companies profiled in this report include Charles River Laboratories, ICON, IQVIA, Labcorp Drug Development, Medpace, Parexel International Corporation, Syneos Health, Thermo Fisher Scientific, Wuxi AppTec, Lonza, Boehringer Ingelheim, Samsung Biologics, AbbVie, Advanced Clinical, BioAnalytix, Asymchem, Alcami, Bavarian Nordic, Catalent, Curia Global, ChemPartner, CMED, Criterium, Cromos Pharma, Evotec, Jubilant HollisterStier, KBI Biopharma, KCR S.A., Kemwell Biopharma, Mesned Pharma Consult Center, Midas Pharma, Medelis, Merck KGaA, OCT Clinical, Pharmaceutics International, ProTrials Research, PROMETRIKA, QPS, Singota Solutions, Sofpromed, Sanofi, Taros chemicals, Veristat, Worldwide Clinical Trials, WuXi Biologics, Wacker Biotech B.V.

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Key Questions Answered

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What is the size of the pharmaceutical R&D outsourcing market?

The pharmaceutical R&D outsourcing market is projected to reach a value of $121.71 billion by 2027.

What is the growth rate of the global pharmaceutical R&D outsourcing market?

The global pharmaceutical R&D outsourcing market is anticipated to grow at a compound annual growth rate (CAGR) of 9.56%.

Who are the key players in the global pharmaceutical R&D outsourcing market?

Some of the key players in the global pharmaceutical R&D outsourcing market include Labcorp Drug Development, Syneos Health, Charles River Laboratories, Thermo Fisher Scientific, ICON, IQVIA, Medpace, Lonza, and Syneos Health.

Which geographic region leads in the pharmaceutical R&D outsourcing market?

The North America region has emerged as the dominant leader in the global pharmaceutical R&D outsourcing market.

What are the factors driving the growth of the global pharmaceutical R&D outsourcing market?

Increasing collaboration and partnerships among contract research organizations (CROs) and stakeholders within the pharmaceutical industry ecosystem, along with a surge in the outsourcing of clinical trials, are significant growth drivers in the global pharmaceutical R&D outsourcing market.